Imagine, if you will, a quaint little financial district of a small village, such as New York, London, or Tokyo. (Godzilla, Mothra, and Rodan have their own flicks, so will not be appearing in this episode of The Just Third Way's Halloween Horror Specials.) Just a quiet, everyday sort of day, such as you might find on any day of the week . . . which is seven days long. (And if you think that writing is bad, you ought to hear some of the dialogue from the low-budget cinematic epics we're satirizing . . . or the real life talk from the financial and economic experts.)
A group of mysterious strangers comes to twon, or "town," if you can spell properly. Or maybe "twon" is correct; it might be something like "Bunburying" in Oscar Wilde's The Importance of Being Earnest, in which people assume a different identity in order to do things completely out of their ordinary patterns of behavior or characters, or to avoid unwelcome social obligations.
Okay, a group of mysterious strangers comes a-twoning into the financial district. Their one distinguishing characteristic is . . . you can't see their faces! Like Claude Rains in The Invisible Man (1933), their faces are wrapped in Ace bandages and their eyes hidden with Foster Grants. They take rooms in the village inn and demand that the staff leave them completely alone. Slowly, however, the horrible secret is revealed: they have no faces because they are the Anonymous Dictators of Money! — ADOMs!
This is the place either to make stupid jokes about adom bombs or come up with a better acronym more descriptive of what they're doing — where is Keith Laumer's Retief of the CDT when you need him? — but we've got a deadline here, folks. Bear with us. Anyway, as soon as the Horrible Secret is revealed, the group goes on a rampage through the town (not twon, this time), leaving a path of destruction in their wake, a ruined economy, fallen governments, poverty, decay, and television sets stuck permanently on Gilligan's Island reruns. Death and destruction follow, and all who manage to escape with their lives become the permanent slaves of the ADOMs.
It turns out that, consistent with Lord Acton's dictum that power corrupts, and absolute power corrupts absolutely, the power that the invisible men wield over money and credit has driven them stark, raving mad (mad, I tell you, mad, mad!).
Think it's a fantasy? Think again. As Pope Benedict XVI reflected yesterday before the Synod Aula, "We think of the great powers of the present day, of the anonymous financial interests which turn men into slaves, which are no longer human things, but are an anonymous power which men service, by which men are tormented and even slaughtered. They are a destructive power, a power that menaces the world."
While they might seem a bit over the top, the pope's comments are only echoing what Pius XI said in Quadragesimo Anno regarding the "economic dictatorship" who, not owning themselves, control vast wealth. (§ 105) CESJ's Just Third Way approach responds to these "concerns" (that's putting it mildly) by pointing out that the global financial system, based largely on principles of finance directly at odds with reality — that is, the natural moral law — makes it virtually impossible to secure justice, and permits the manipulation of wealth on a vast scale, to the detriment of a sound economy and a stable political order.
These false principles are embedded in Keynesian economics and, to a lesser extent, in the Monetarist and Austrian schools. All three accept as a virtual religious dogma the disproved premise that new capital formation cannot be financed except by cutting consumption, accumulating money savings, then investing. This is even found in the encyclicals — although, being a matter of science (finance is a science), is obviously not to be taken as an infallible declaration. Naturally, people take it as infallible, and then reject what is infallibly declared, such as the natural rights to life, liberty (freedom of association), private property, and the "pursuit of happiness" (the acquisition and development of virtue).
The situation is not helped, in fact, in a certain sense may be said to be caused by widespread misunderstanding of the institutions of money, credit, banking, and finance, but (above all) private property. Understanding the situation would be relatively easy if people did not insist on using the wrong definitions, or on changing definitions when reality intrudes too much into their proposal.
The Just Third Way approach is based on Say's Law of Markets, which presumes as a given the legitimacy of private property in labor, land, and capital — the classical triad of inputs to production. Say's Law, which is misleadingly summarized as "production equals income, therefore, supply generates its own demand, and demand its own supply," is better understood as a right of private property: the right of disposal or control. As Louis Kelso observed in an article in the American Bar Association journal, "property in everyday life is the right of control." ("Karl Marx: The Almost Capitalist," ABA Journal, March 1957.)
Trying to keep it as simple as possible, Jean-Baptiste Say explained to Thomas Malthus in response to the latter's criticisms (Letters to Mr. Malthus on Several Subjects of Political Economy, 1821), that we do not actually purchase what others produce with this thing called "money." Rather, we purchase the productions of others with what we ourselves produce by means of our labor, land, and capital. "Money" is simply an abstraction, a symbol of our private property stake in what we own, and is the means of conveying that private property stake to others in an exchange. (pp. 2-3.)
Money therefore consists of anything by means of which we convey a private property right to another, that is, settle a debt or give a gift. For thousands of years before the invention of coined money, people conveyed this private property right by "drawing bills." That is, the owner of the present value of an existing or future marketable good or service drew up an agreement that he or she would deliver the good or service or the value thereof at a specified future date. Often these agreements circulated as money in the community, if the original issuer or the indorsers (traditionally spelled that way instead of "endorser") were known and trusted. Because these instruments usually passed at less than face value because people had to wait to get the value conveyed (although sometimes they would pass at more than face value, or at a premium), using the instrument in exchange was (and is) called "discounting" and "rediscounting."
A rough calculation reveals that these "bills of exchange," as they are called, accounted for cir. 60% of GDP in 2008. In the 1830s, Congressman George Tucker estimated that bills of exchange accounted for more than 95% of the money supply in the United States. None of this money saw the inside of a bank, being created between two or more parties to a transaction in the course of trade — the special term being "merchants' acceptances." Of course, for convenience and because a bank's credit is supposed to be sound and accepted throughout the community, bills of exchange can be discounted or rediscounted at a commercial bank, in which case they are called, "bankers' acceptances."
A commercial bank can, in turn, rediscount bills of exchange at a central bank, which is, in fact, why central banks were invented. A central bank was never intended to finance government, although financial history seems to be one long saga of how to circumvent the original intention, from the Duc d'Orleans seizing control of Law and Company's bank in the 1720s, the Crown seizing effective ownership of the Bank of England in 1694, or the Federal Reserve being hijacked to finance the entry of the United States into World War I.
The pope pinpoints a serious problem in the global financial system: the disassociation of money creation from production of marketable goods and services. That isn't how he says it, of course, but that is the essence of the problem. There has been an effective abolition of private property in what you produce by means of your labor, land, or capital by the State and the "financial services industry." They have taken the power of drawing bills away from ordinary people, and restricted to themselves the ability to issue claims on what other people own, i.e., "creating money" backed only by the State's promise to pay out of future tax revenues.
By means of this manipulation of money and credit, the "anonymous financial interests" are able to control the economy and determine who may participate in production and on what terms — "Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will." (Quadragesimo Anno, § 106)
We believe that CESJ's "Capital Homesteading" proposal directly addresses this concern. Principally, this is done by freeing humanity from what Kelso and Adler termed, "the slavery of [past] savings," by means of which the "anonymous financial interests" are enabled to control the financial system and the economy . . . even when they have no real idea what they're doing. (No one deliberately chooses evil knowing it to be evil, but because he or she believes it to be good.) By vesting ordinary people with the power to create money by opening up democratic access to capital credit, collateralized by capital credit insurance and reinsurance, the power of "the despotic economic dictatorship" will be broken. The "Masters of Money" will no longer be anonymous, because we ourselves will control money and credit for our own benefit and that of the common good.